Pernod Ricard Korea – An innovative company to conquer a peculiar market!

For a French guy like myself, meeting a successful French company on foreign ground was a great event! And I must say, I am proud to see such success while so far away from your home country. And here I am not only relating the success of Pernod Ricard in Korea but also on a global scale where the company is enforcing a smart, flexible and adaptable strategy. All this in order to do what? To meet specific market requirements depending on the country you are operating in. It is all the more important that tastes for food and beverages differ a lot from one country or one continent to the other. That we had already experienced when testing Korean typical food. And if some of us had a hard time adapting, it proves at least the reality and necessity of adapting your offer to the customers you are facing.

But let us come back to Pernod Ricard itself. What is this company? From what we understood, Pernod Ricard is a “Créateur de convivialité”! What a typical French catch phrase! As a foreigner you will probably understand the first word but maybe not the last one. “Convivialité” is about making the atmosphere fit the people you are with. It is about putting them at ease in order to trigger positive emotions. And that is exactly what Pernod Ricard is playing on! The wines & spirits are not just wines & spirits, they are meant to be tools, links that will bind people together and have them have an enjoyable time together.

Since the merger between Pernod and Ricard 40 years ago, the company has been developing mainly through inorganic growth in 2001, 2005 & 2008, the company had doubled its revenues. Doubled three times in less than 10 years… Quite impressive. But Pernod Ricard is not just growing for growing, it has been slowly building a broad portfolio of premium and luxury products in the wines & spirits industry. So that the company can now focus on its organic growth, building up and expanding internal capabilities on a world wide scale. And these capabilities evolve around two main pillars which are Premiumisation & Innovation. The former is about authenticity of selling products that are being produced in their home country. It gives credibility to the brand and allow each product to keep its own history. The latter is about fostering innovation thanks to ideas funded by a pool of Pernod Ricard Group. It acts like an internal think tank and promotes product innovation!

I told you earlier that the company was particularly skilled in tailoring its offer depending on the market. Indeed, while certain products are a must (Chivas and Absolut for instance), each subsidiary has the flexibility to adapt its portfolio depending on the country it is operating. Korea for instance is a very peculiar market as it possesses its own beverages such as Soju, the famous national drink (it tastes like diluted vodka and is 17% of alcohol). Also Korean people have specific tastes in terms of beverages and some brands or types of beverages are completely unknown in this market. Cognac for instance is only a very niche product that a few people know about and that a few people are able to purchase. Whiskey on the other hand, as well as Vodka, are widely consumed in Korea. The whiskey market in Korean has defined its own criteria with entry products no less than 12 years of age, premium one with 17 years of age and super premium with 21 years of age. It is important to know that consumers in this market (and Korea is the same) are very loyal to their brands so that making people shift from the competition to Pernod Ricard is very hard to achieve. But as this market is also very normalized depending on age, status, if the bottle is for personal use or for offering to someone, it allows trading up strategies where a brand will be able to offer different products for different situations. And this especially matches with Korean culture which is as well very much normalized. As a consequence the spirits market echoes pretty well with Korean people.

If Pernod Ricard is positioned as a challenger on Korean market, the regulation does not make things easier. On the one hand taxes have been raised dramatically to diminish alcohol consumption in the country and on the other hand the duty free market in Korea is competing directly with “standard” channels. Indeed in Korea duty free shops are allowed downtown and enable people to buy products that will then be handed over to them when leaving the country. This system creates a direct competition with the domestic market that finds itself in a hard position to sell very high end products (mainly because the price difference is too important). Also drinking patterns are changing in Korea as 80% of the population allowed to drink used to do so more than once a week. This tendency is now plummeting, reducing mechanically the potential market in South Korea. But new trends are appearing, trends that will probably counterbalance the negative effects of the current situation. To cite only one example: women are demanding more and more drinks that will fit their tastes (like flavored vodka which represents 2/3 of the total vodka market!).